Suit Says 11 Companies Rigged School Milk Bids

TALLAHASSEE — Attorney General Bob Butterworth filed an antitrust suit Tuesday against 11 companies, including two with plants in Orlando, for allegedly rigging school milk bids in 32 counties.

The suit accuses the firms, which include some of the nation's biggest dairies, of overcharging the school districts by millions of dollars during a 10-year period. The overcharges include sales of the half-pint milk cartons to schools in Orange, Seminole, Lake, Osceola, Volusia and Brevard counties.

Butterworth said the extra costs inevitably are passed on to students and ''the ultimate effect of the conspiracy was to take coins from the pockets of schoolchildren.''

The civil suit, filed in U.S. District Court in Miami, is the largest antitrust action ever against the milk industry and probably will trigger similar investigations in other states where the companies operate, he said.

''The complexity and scope of this conspiracy is probably unprecedented in Florida,'' Butterworth said. ''It took many months of investigation and the use of sophisticated computer analysis to crack it.''

He said the investigation is continuing and could widen to include more corporations and possibly even criminal charges.

Butterworth said his office has not determined the actual amount of overcharges but they could total at least $10 million between 1978 and 1987. The six Central Florida districts contracted to spend $4.1 million on milk during this school year.

The seven dairy processors named in the suit are Borden Inc. of Columbus, Ohio, which has plants in Orlando, Miami and Tampa; Dean Foods Products Co. of Chicago, which operates T.G. Lee Dairy in Orlando and McArthur Dairy in Miami; Southland Corp. of Dallas, which operates Velda Farms in Miami and Winter Haven; Pet Inc. of St. Louis, which has a plant in St. Petersburg; Kraft, which operated in Miami and Tampa before leaving the market in 1984; Flavorich Inc. of Louisville, Ky.; and Hart's Dairy of Fort Myers.

''We're really not in a position to comment whether the lawsuit is meritorious or not,'' said Eric Blanchard, general counsel for Dean Foods. ''It's really too premature.''

John Rodgers, senior vice president for Southland, said the corporation is aware of the lawsuit but would not issue a statement. ''We're hopeful the matter can be resolved,'' he said, adding that Southland does not expect the suit to damage its public image.

Scott Horne, spokesman for Kraft, denied any wrongdoing and said the company would vigorously defend itself.

Butterworth would not discuss what triggered the investigation, which started about two years ago, because the case is still open. He said the conspiracy began in the late 1960s or early 1970s when the larger dairy processors agreed to manipulate bids for milk contracts awarded by the school districts. The idea was to allow each firm to meet its desired production quota at inflated prices, he said.

Once quotas were agreed upon, one company would submit an intentionally inflated bid while the others gave even higher bids, knowing they would lose the contract, the attorney general said. The conspiracy was carried out on a contract-by-contract basis, and the firms would alternate their bids between schools or counties to make it appear they were competing, Butterworth said.

However, the agreement essentially guaranteed the entire market to the firms involved, Butterworth said. The smaller processors and distributors were included in the conspiracy when necessary, he said. School officials apparently had no knowledge of the bid-rigging and were not involved, the attorney general said.

''It's very difficult to crack this type of antitrust case,'' Butterworth said. ''It's very similar to the highway bid-rigging of a few years ago.''

The suit seeks three times the amount of overcharges to be determined, as allowed under antitrust laws. It also requests a permanent injunction forbidding bid-rigging as well as payment of court costs and attorneys' fees. Food services officials in Central Florida said they have been cooperating with Butterworth's office for 18 months, providing invoice statements from as far back as 1978. Although unaware of what information on which Butterworth based the bid-rigging charges, some school officials said they had not noticed significant cost increases.

Tom Ulberg, senior administrator of food services for Orange County schools, said the price of half-pint cartons of milk has fluctuated in the last five years.

Orange County, which distributes about 11 million half-pint cartons of milk each year, now pays 15.7 cents for whole milk. In 1987 the price was 13.7 cents, and the year before it was 14.59 cents.